A potential change of ownership of Channel Four Television Corporation - Channel 4 response to DCMS consultation September 2021
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
A potential change of ownership of Channel Four Television Corporation Channel 4 response to DCMS consultation September 2021
Channel 4
Contents
Executive summary 2 Question 6a
With reference to supporting evidence, what would the
economic, social and cultural costs and benefits of
Introduction 5 Channel 4 moving out of public ownership be on
overall audience experience?41
Consultation questions Question 6b
Response to consultation questions14 With reference to supporting evidence, what would the
economic, social and cultural costs and benefits of
Question 1 Channel 4 moving out of public ownership be on
Do you agree that there are challenges in the current the Channel 4 Television Corporation itself?41
TV broadcasting market that present barriers
to a sustainable Channel 4 in public ownership?15 Question 6c
With reference to supporting evidence, what would the
Question 2 economic, social and cultural costs and benefits of
Would Channel 4, with a continued public service Channel 4 moving out of public ownership be on
broadcasting licence and remit, be better placed investment in the independent production sector?42
to deliver sustainably against the Government’s aims
for public service broadcasting if it was outside Question 6d
public ownership? 21 With reference to supporting evidence, what would the
economic, social and cultural costs and benefits of
Question 3 Channel 4 moving out of public ownership be on
Should Channel 4 continue its contribution to levelling investment in the independent film sector?42
up the regions and nations of the UK through retaining
a presence outside London and a strengthened regional Question 6e
production remit?24 With reference to supporting evidence, what would the
economic, social and cultural costs and benefits of
Question 4 Channel 4 moving out of public ownership be on
Should the Government revise Channel 4’s remit the TV advertising market?46
and obligations to ensure it remains relevant in
an evolving broadcast market? 32 Question 6f
With reference to supporting evidence, what would the
Question 5 economic, social and cultural costs and benefits of
Should the Government remove the publisher-broadcaster Channel 4 moving out of public ownership be on
restriction to increase Channel 4’s ability to diversify its investment in the creative industries sector more widely?49
commercial revenue streams?37
Question 6g
With reference to supporting evidence, what would the
economic, social and cultural costs and benefits of
Channel 4 moving out of public ownership be on
competition between Channel 4 and other PSB and
non-PSB channels?50
Question 6h
With reference to supporting evidence, what would the
economic, social and cultural costs and benefits of
Channel 4 moving out of public ownership be on
the regions and nations of the UK?51
1
Channel 4
Executive summary
We fully endorse the
Government’s support for the
UK’s PSB system, and for a
successful Channel 4 – both
now and in the future.
The Channel Four Television Corporation has occupied an • Accelerate our role as a public service catalyst across the UK,
important place in the UK’s cultural landscape ever since it was with £5 million of investment to reach 15,000 young people
established by the Thatcher Government almost 40 years ago. In annually with training and development initiatives from 2022;
that time, it has become a unique public service media company including a new digital academy for young people from lower
and British success story, building the UK’s independent socio-economic backgrounds
production sector, creating thousands of jobs across the country
and serving generation after generation of young people.
Channel 4 is already delivering essential cultural, economic and
social impact for the whole of the UK. These three ambitions
Under our current ownership model – in public hands, and at
will ensure that Channel 4 thrives while delivering more value
no expense to the public – we are fully focused on delivering
to viewers, supporting more jobs and projecting British culture,
cultural, economic and societal value for the UK. This model has
values and creative excellence overseas.
been the bedrock of our success in building a much-loved British
institution.
As the Government considers how different ownership models
might affect that impact in the decades ahead, we note that
Channel 4 is an organisation that embraces change, and
the decision on Channel 4’s future ownership could have
we share the Government’s stated objectives to enhance
profound implications for UK viewers and a permanent effect on
Channel 4’s unique role in broadcasting, and to ensure the
investment and jobs in the UK’s creative sector.
organisation thrives for another 40 years1. From the moment
Channel 4 was created to be a radical, innovative force in UK
In writing this response, we have carefully assessed these
broadcasting, it has been changing and evolving – and as a
implications in an evidence-based manner.
national asset, it is right that we regularly consider what more
we can do to deliver and increase our impact, both for British
audiences and the UK economy.
Channel 4 under public ownership has delivered
As an independent statutory corporation accountable to significant benefits to the UK
Parliament (distinct from a non-departmental public body),
Under our unique model and remit, delivering impact for the
Channel 4 has a responsibility to set out its view on how we deliver
UK is our central mission – and we do so in multiple ways. This
impact today, and our plan for further growing impact in future.
includes delivering distinctive British public service content
available to all for free, being a creative incubator for SMEs
The Government’s consultation is an opportunity for Channel 4
across the UK, levelling up the creative economy, investment
to consider how it could deliver even more for the benefit of
in British Film, catering for underserved audiences, nurturing
the British people. There are three areas in which we believe
talent, equipping young people with the skills they need, and
Channel 4 could build the most impact. We intend to:
investing in our Nations and Regions. We do all of this at no cost
to the British taxpayer, and our current ownership structure is
• Excel as the young people’s PSB streamer, investing a core part of our ability to prioritise and deliver these goals.
£50 million more in content for younger viewers across In particular, we are still only in the early stages of our 4 All the
genres, focused on streamed and social content UK plan to drive economic growth outside London – with new
• Expand as a publisher-broadcaster internationally, increasing offices in Leeds, Bristol and Glasgow, Channel 4 News to open
our Global Format Fund to help indies create new formats a Leeds hub later this Autumn and plans to expand our regional
with global potential; and launching an advertiser-funded skills initiatives to provide aspiration and opportunity to young
international streaming service people outside London.
1 DCMS consultation on a change of ownership of Channel 4 Television
Corporation, 2021.
2
Channel 4
digital growth, with digital advertising revenues having doubled
since 2016.The challenges the Government identifies are not
directly linked to public ownership, and therefore it is not
evident that a change in ownership would address these issues.
A Channel 4 remaining under public ownership
can deliver even greater value for Britain – with
more British content, projecting British soft power
overseas and creating more British jobs
We have carefully thought through the Government’s questions
about how Channel 4 can thrive in the long term. We have
the ambition and the opportunity to go even further in future
– delivering even more for Britain and our audiences. These
ambitions are focused on supporting more British jobs, serving
British viewers with more British public service content, and for
projecting Britain’s cultural power to a global audience.
The Great British Bake Off Channel 4’s focus is on delivery of our remit, and
maximising our public value: moving Channel 4
to a profit driven model could have negative
consequences for these policy objectives
Moving Channel 4 into private ownership will have an inevitable
and fundamental impact on the incentives and culture of the
organisation. Under public ownership, the remit permeates
Channel 4’s full range of programming – far beyond the specific
Despite the rapid changes in the broadcasting quotas required by its licence. Under private ownership,
sector, the evidence demonstrates that Channel 4’s Channel 4’s fiduciary duty would be to maximise returns to
model is in a strong position to face the future shareholders. This dynamic can be seen in other commercially
funded, but privately-owned PSBs like ITV. For instance, ITV’s
We do not agree with the consultation document’s assessment most recent results show an EBITA margin of c.20%2. A privately-
that Channel 4 is overly reliant on advertising revenues that are owned Channel 4 would be expected to replicate similar
in decline, and that changes in the broadcasting sector threaten margins, and this would be most likely achieved through a cut to
Channel 4’s sustainability. The Government is right to identify our biggest outgoing cost, our content budget.
the challenges in the broadcasting sector, which relate primarily
to a decline in linear viewing and increasing competition for Given this, a private owner would have a natural and legitimate
attention from streaming services. But these challenges apply incentive to seek both to dilute the more commercially onerous
to all broadcasters, regardless of ownership status. Further, parts of the channel’s remit and to scale back those additional
the evidence demonstrates that both digital and broadcast public benefits, whether that is covering public service themes in
advertising remain robust. As set out in more detail in our our mainstream programmes or our training and skills initiatives,
response to Question 1, advertising will continue to be a strong which are not mandated by the statutory remit.
business model: all forecasts show that the digital advertising
market will continue to grow, broadcast advertising remains
resilient, and consumers will continue to value free to view,
advertising-funded content.
Indeed, the evidence shows that Channel 4 is addressing these
challenges more effectively than our competitors – we are
growing our revenues despite this increase in competition and
shifting quicker than others to digital. In 2021, we are projecting
revenues of over £1 billion for the first time in our history with
growth of +13% compared to 2019. This is in large part driven by
our market leading growth in digital revenues which are forecast
to be up 32% year-on-year and comprise 19% of our total
revenues.
Channel 4 has also demonstrated the ability of its model to
deal with market shocks as well as long-term structural change.
Despite the worst global recession in living memory, Channel 4
ended 2020 with a record financial surplus of £74 million – a
result of prudent cost-cutting across the business followed by
strong viewing performance – due to our creative choices and
agility – across linear and digital and a robust return from the
advertising market. This is proof of the agility of the model and
its ability to adapt to a changing environment. Channel 4 is an
efficient commercial organisation, well adapted to operating in
Gogglebox
a competitive market. The organisation is globally recognised as
leading the way in digital transformation and in 2020 continued
on the business’ longer-term trend of robust market-leading 2 ITV annual report (2020) https://www.itvplc.com/~/media/Files/I/ITV-PLC/
documents/reports-and-results/annual-report-2020.pdf
3
Channel 4
A change of ownership will impact on investment Consideration of changes to Channel 4’s ownership
and jobs in the creative industries must be based on a clear analysis of what the
Government wants Channel 4 to deliver, and then
An impact assessment will need to consider the impact on
investment and jobs of any decision to move Channel 4 into
an evidence-based assessment of how these are
private ownership, particularly in the Nations and Regions. best delivered
Any decision on the future of Channel 4’s ownership should be
In independent analysis commissioned for Channel 4, EY
based on data and transparent analysis of the implications of any
estimates that privatising Channel 4 with its current remit and
changes and the likely impact on Channel 4’s future prosperity,
role could result in a reduction in Channel 4’s contribution to
the delivery of its public remit, the impact on the UK’s creative
GDP (measured as gross value added or GVA) through its supply
industries and the media content and choice available to the
chain in the creative industries of £1 billion (-15%) over a ten-year
wider British public.
period compared to no change of ownership for Channel 4. This
would represent an estimated reduction in the number of jobs
Channel 4 is sharing its own analysis with the Government for
supported by Channel 4 in its supply chain each year across
this purpose – including economic analysis from EY on the
the UK of 1,300 (-14%) compared to a scenario where Channel 4
potential impact of a change in ownership on GVA and the wider
remains in public ownership.
creative industries, as well as viewer research. This research
shows that the public is not currently supportive of a change in
As such, there is a real risk that moving Channel 4 into private
ownership for Channel 4 – an audience survey conducted by
ownership will reverse the progress made towards rebalancing
Tapestry in July 2021 found little support for privatisation; and,
the creative sector across the UK.
once Channel 4’s model was explained to the sample, 82% of UK
adults said that Channel 4 should remain in public ownership3.
A change of Channel 4 ownership will impact on
viewer choice Looking ahead
We are concerned that moving Channel 4 into private ownership This is a profoundly important decision for Government and
could also result in a reduced diversity and quality of content Parliament to make, with many associated risks to the wider PSB
for UK viewers. While global players produce content to appeal ecosystem, the creative economy, and jobs outside London.
to as broad an international audience as possible, Channel 4 Therefore, as the Board of an independent statutory Corporation
is focused on commissioning content tailored to the lives and that is wholly focused on delivering the Channel 4 remit, it is
experiences of the British people. Channel 4’s public ownership our duty clearly to express what the consequences and impacts
means we can take a risk on content that may not deliver a of any changes in ownership might be, based upon detailed
financial return: if we had not been able to take this approach, research, analysis and market evidence.
valuable public service content and films from Slumdog
Millionaire to Gogglebox may never have been commissioned at Taking account of our market-leading progress shifting our
all. Indeed, many other shows on other broadcasters may also business to digital through the Future4 strategy, and the wider
not have existed were it not for the creative incubator role that global revenue and market dynamics – particularly the strength
Channel 4 plays. We note that Andy Harries, Chief Executive of of digital advertising – the evidence suggests that continued
Left Bank Pictures who produce The Crown, recently commented public ownership of Channel 4 would create the right conditions
that Channel 4 was integral to his early career, and that “If not only to overcome the audience and competitive challenges
Channel 4 had not rescued The Deal (a 2003 film produced by the Government has rightly identified, but also to ensure that
Left Bank and written by Peter Morgan who went on to write The public service broadcasting in the UK continues to thrive.
Crown), it is almost certain The Crown would not have existed...
Channel 4 is the academy of British TV. It is vital for new ideas, Having considered all the available analysis extremely carefully,
new companies and new people. It’s a unique British creation we have concluded there is no evidence that the irreversible
whose structure and remit is as vital today as it was nearly 40 transfer of Channel 4 from the British public into private
years ago.” commercial hands will be of benefit to either British audiences or
the UK economy, and may indeed cause them harm.
There are other levers available to the Government Whilst the evidence does not conclude that a change of
to enhance and strengthen Channel 4 ownership would be beneficial, we intend to work constructively
with Government to discuss our assessment of the risks and
Beyond amending Channel 4’s status as a publisher-broadcaster,
opportunities of the options under consideration, and to
the consultation does not outline other potential policy
investigate how we could work together to further Channel 4’s
options that could seek to bolster Channel 4 in the long term
success, for the benefit of the whole UK.
without the risks that will be caused by a change in ownership.
Alongside the Future4 strategy, which will enable a clear and
In the last few weeks, Channel 4 has powerfully demonstrated
sustainable future for Channel 4 as a publicly-owned entity,
its capability to provide unique, socially valuable and deeply
there are a range of levers that we believe the Government
resonant content. From the Tokyo Paralympics, to the
could also be considering, separate to ownership. These include
historic Black to Front initiative and most recently bringing
areas where the Government has already committed to taking
Emma Raducanu’s US Open triumph, to the whole nation in a
forward action – such as to modernise the legislation on public
ground-breaking partnership; these are things that no other
service prominence to apply across digital platforms, as well as
PSB would deliver in the way that we do, and we believe that
reviewing the commercial relationships between platforms and
is inextricably tied to our current ownership model.
publishers through the new Digital Markets Unit. We believe these
measures could have a material impact on Channel 4’s successful
Innovation and change are at the heart of Channel 4. The
transition to a digital-first organisation. The Government could
Channel 4 Board’s overwhelming aspiration is to ensure a robust
also consider alternative means of accessing capital, and
and sustainable future for the organisation, and to deliver even
modernisation of the licence obligations and the public service
greater impact for UK viewers and the wider creative industries –
remit. We look forward to discussing these matters further with
a goal we wholeheartedly share with Government.
the Government.
3 Tapestry, Understanding Channel 4, August 2021.
4
Channel 4
Introduction
1. W
e support the Government’s recognition of Channel 4 in public ownership also underpins British cultural
the importance of the UK’s PSB system, and of a influence around the world. Its investment in British talent
through Film4 has led to 37 Oscars and titles as diverse as The
successful Channel 4 – both now and in the future Inbetweeners to The Favourite, Derry Girls to Everyone’s Talking
At the outset of this submission, it is important to be clear that About Jamie project British culture, identity, humour and history
Channel 4 remains unique in the UK media landscape: far beyond the borders of the UK.
Channel 4 strongly believes that public service media is more
• Channel 4 is a free-to-air broadcaster that is owned by the
important than ever. It is an essential means of addressing many
public, to serve the public, funded wholly by commercial
contemporary social problems, from polarisation through to
revenues at no cost to the public.
disinformation. Within this, Channel 4 plays a unique role –
• For forty years, Channel 4 has grown, evolved, and modernised reaching underserved audiences, covering stories not covered
around this hybrid model. by others and supporting the wider creative sector. We therefore
strongly agree that the Government should be considering ways
• Channel 4’s positive impact both for British viewers and the to safeguard Channel 4’s role for the future.
UK’s creative economy is significant – our programming has
enriched people’s lives and transformed social attitudes, and The question at the heart of the consultation is: what is the
our investment in the UK’s creative industries has helped create best means of achieving this objective? The consultation sets
and sustain the UK’s production sector across the Nations and out to test the hypothesis that a new ownership model would
Regions of the UK. be the best way of ensuring Channel 4’s future success and
• Channel 4’s public ownership and not for profit model enable sustainability as a broadcaster delivering value for the British
us to prioritise the delivery of our remit rather than the delivery public. Channel 4 has carefully and objectively assessed the
of profits, while operating in a competitive market ensures we rationale for this view – including making sure we test our own
are an efficient organisation. The publisher-broadcaster model assumptions about the benefits of public ownership.
then enables us to funnel commercially sourced revenues back
into the creative sector – at no cost to the taxpayer. Profit- This includes asking:
led models play an important role in the UK’s broadcasting
ecosystem, but it is important to recognise the different • Whether selling Channel 4 would enable it to better navigate
priorities and incentives at work between different models, and the challenges of a changing broadcasting market than public
the role that Channel 4’s hybrid model plays in the outputs it ownership
delivers both on and off screen.
• Whether selling Channel 4 would enable it to maintain or
potentially increase its ability to deliver public service impact
Importantly, Channel 4’s role as a public asset runs through for UK audiences and the creative economy
the core of everything we do, creating an incentive to maximise
• Whether removing Channel 4’s ‘publisher-broadcaster’ status
returns for the British people through impactful content,
would allow Channel 4 to generate new revenue streams
economic growth, and support for the creative sector. On
without having a negative impact on the television production
average, Channel 4 reaches 29.8 million viewers a week and
sector
our streaming service, All 4, has 24 million registered viewers
including 80% of all 16-24-year-olds and 72% of 16-34-year-olds
in the UK, experiencing 26% growth in streaming views over 2020 In this response, Channel 4 has sought to inform the
alone and 29% YTD on 2021. All 4 is the youngest skewing PSB Government’s consultation by providing answers to these
player, with a 37% 16-34 profile – closer to Netflix and Amazon questions in an open, evidence-based way. It draws on
than any other UK PSB. economic analysis, commercial/market analysis, viewer
research and case studies to assess what the implications of
private ownership might be – for Channel 4, for viewers, for the
wider creative sector, and for the UK as a whole.
The remainder of this introduction sets out:
• How Channel 4’s current model has enabled it to deliver an
enormous public impact
• How Channel 4 is responding well to the challenges facing the
industry
• How Channel 4 under public ownership can deliver even
greater value for Britain
• How this impact could be jeopardised by moving Channel 4
into private ownership
• The importance of making decisions based on clear objectives
and evidence
5
Channel 4
2. Channel 4 under public ownership has delivered
significant benefits to the UK
There are three fundamental pillars underpinning the way
Channel 4 operates:
• Its statutory public service remit for innovation, diversity and
risk-taking.
• Its prioritisation of public service whereby public outcomes
are prioritised over commercial ones.
• Its publisher-broadcaster status, whereby all programming
investment is with independent suppliers across the UK.
Channel 4 News
These three elements of Channel 4’s model work to support
each other – changing one element could have the unintended
• Serving young people: We are the youngest-skewing PSB in
consequence of undermining others.
the UK4 and invest in content for young people, delivered on
the platforms where they are spending more of their time. We
We also believe these three elements are less attractive to a
are successfully reaching this audience on digital and social
commercial owner than to a public one – and thus could be
platforms – All 4 is the youngest-skewing PSB player, with a
under threat after a change in the model.
37% 16-34-year-old profile – closer to Netflix and Amazon
than any other UK PSB. 22 out of 25 of the youngest-profiling
Under our current ownership model and remit we deliver impact
shows of any UK PSB were on Channel 4. 90% of 18-34s
for the UK in a number of different ways, and we do so at no cost
reached by Channel 4’s portfolio of channels on social, ahead
to the British taxpayer.
of LADbible, Disney and the BBC. Because of their trust in our
brand our news and current affairs has particular resonance
• Distinctive British public service content: Despite abundance and reach with young people and helps tackle the spread of
of choice and growth in video content, Channel 4 offers misinformation online. Channel 4 News is the biggest news
something unique compared to the global streamers – programme on social media in the UK – in 2020, more than half
innovative and contemporary British produced TV and film a billion views were recorded to Channel 4 News content on
content reflecting lives and experiences of British viewers. Twitter, Facebook and YouTube, as viewers sought a different
We make distinctive shows and take risks that no other British style of news and expert commentary. Channel 4 News
broadcaster will. Shows that tell our shared national story, such includes more investigative journalism and more international
as Gogglebox and Grayson’s Art Club, and films like The Father content than any other peak-time news programme. This
and Everyone’s Talking About Jamie. Elsewhere, prime time requires significant investment, often loss-making, which a
popular factual shows like The School That Tried to End Racism, more commercially motivated owner may decide not to make.
The Write Offs or The Restaurant that Makes Mistakes explore
major societal issues. We entertain our viewers, but we do so • Supporting SMEs across the UK: Channel 4 is unique as a
while representing unheard voices and opinions from across publisher-broadcaster – we make none of our own programmes
the UK and addressing issues that matter to them. Channel 4 and instead invest our revenues into our supply chain. Ofcom
shows also have a measurable impact on people’s lives: the recently described this as “the most significant” policy
Paralympics Games has changed attitudes towards disability intervention in developing the UK’s independent production
and It’s A Sin led to a rise in HIV testing. sector.5 The publisher-broadcaster model means we invest
in small and medium businesses with British entrepreneurs
and new talent across the UK, supporting growth not
just in the television production sector, but in consumer
digital businesses and advertisers too. Economic research
commissioned from EY found that Channel 4 supports nearly
£1 billion in GVA a year and 10,000 jobs6.
I feel like Channel 4 is genuinely • Levelling up the creative economy: Channel 4 already invests
interested in hearing about places more in independent production companies outside London
than any other broadcaster, including the BBC7. Our pivotal
and characters that we don’t see role in helping the creative economy outside of London will be
on TV that often, which have been magnified by our increased content spend – now 50% of our
total spend – with producers in the Nations and Regions, our
ignored. There has never been a new HQ in Leeds and Creative Hubs in Glasgow, Bristol and
comedy about Northern Ireland like Manchester, and our investment in skills and training bringing
disadvantaged young people into the digital workforce and
Derry Girls – Northern Irish people transforming their prospects as we have done recently with
our 4Studio apprenticeship scheme. This is underpinned by
have never really seen themselves our commitment to the Nations and Regions. We have further
reflected in this way before.” leveraged the development of the UK’s creative economy
beyond our commissioning activity, for example by acting as an
incubator of talent and entrepreneurial producers, via the Indie
Lisa McGee, Creator, Derry Girls Growth Fund.
4 BARB data.
5 https://www.smallscreenbigdebate.co.uk/__data/assets/pdf_
file/0023/221954/statement-future-of-public-service-media.pdf
6 EY, Channel 4’s contribution to the UK, 2021 https://assets-corporate.channel4.
com/_flysystem/s3/2021-04/EY%20Report%20for%20Channel%204%20-%20
Channel%204%27s%20contribution%20to%20the%20UK.pdf
7 O&O, Made-outside-London PSB production data, 2021.
6
Channel 4
• Projecting Britain’s cultural power globally: Channel 4’s 3. D
espite the rapidly changing broadcasting
support for British independent filmmakers has resulted in sector, evidence demonstrates that Channel 4’s
significant success for Film4, exporting British talent and
creativity all over the world. As the consultation notes this has
model is in a strong position to face the future
led to significant international acclaim including 37 Oscars for We agree with the Government that there are significant
Film4 backed productions and careers started from Dev Patel changes occurring in the broadcasting market – from increased
to Steve McQueen. Film4 has an annual budget of £25 million competition from global streamers to declining linear revenues.
making it one of the biggest investors in UK independent film. In Indeed, the Future4 strategy we laid out in 2020 is directly
just over five years since adopting its current business strategy, aimed at addressing these market shifts. The challenges in
Film4’s investment of just over £100 million has generated the broadcasting sector are well-known: they relate primarily
around £450 million of total investment in UK films and to a decline in linear viewing and increasing competition from
filmmakers. The other two pillars of investment in UK Film are streaming services. These issues apply to all broadcasters,
BBC Film (£11 million) and the BFI (£26 million) who are reliant regardless of ownership status. Indeed, the evidence shows that
on public and lottery funding. Beyond film, Channel 4 also has a Channel 4 is addressing these challenges more effectively than
strong track record of building programme brands and formats our competitors. They are therefore not directly linked to public
with global scale. Channel 4 commissioned seven of the top 25 ownership; and therefore it is not clear that moving Channel 4
best-selling UK unscripted formats around the world in 2019. into private ownership would address these challenges.
Channel 4’s model has proven to be successful, resilient
and sustainable. Despite the worst global recession in living
memory, Channel 4 ended 2020 with a record financial surplus of
£74 million. This was a result of swift managerial decision-making
Channel 4 continues to set the and demonstrates the agility and adaptability of the model.
benchmark for how all other Channel 4 is globally recognised as leading the way in digital
transformation and is successfully exploiting rapid growth in digital
broadcasters around the world advertising revenue. Through our Future4 strategy, Channel 4 is
cover the Paralympics, not just in rapidly transforming into a digital PSB, with digital advertising
revenues having doubled since 2016. Digital now makes up 17%
terms of Games-time coverage and of total revenues, compared to 9% for peers. Key to Channel 4’s
the diversity of on-screen talent, success has been its ability to maintain its resonance with young
viewers – who are at the forefront of changing viewer habits – and
but with regards to engagement maintain and grow advertising revenues despite these changes.
Channel 4’s is the youngest profiling PSB in the UK8, with double
and promotion. It is testament to the young audience share of BBC. 80% of UK 16-24-year-olds are
Channel 4’s outstanding commitment signed up to All 4, which delivered a record 1.25 billion streams in
2020 and is on course for 1.5 billion views in 2021, ahead of target.
to Paralympic broadcasting and
promotion that Paralympians are As a result, Channel 4 is thriving and is well set for future growth.
2021 revenues are set to grow by 19% against 2020, but – even more
household names in the UK and impressively – our revenues are likely be +13% compared to 2019.
Within this, digital revenues are forecast to be up 32% year-on-year
British TV features more on-screen and comprise 19% of our total revenues, while non-advertising
talent with disabilities than any revenues are set to make up 9% – both metrics very much on-
target for 2025. Indeed, September 2021 will show our largest ever
other country.” monthly revenues at £120 million, up +26% year-on-year.
Andrew Parsons, International Paralympic We are forecasting over £1 billion of revenues for the first time
Committee President ever and net assets of over £0.5 billion by this year-end – which
represents significant capital available for us to invest in our future.
The fact that we are on track in 2021 to deliver our highest ever
revenues, despite the increase in competition, demonstrates that
from far from a company in decline, Channel 4 is a growth business.
The current strategy of digital transformation goes with the
grain of Channel 4’s track record in evolving its business to meet
changing consumer habits – we were the first broadcaster in
the country to launch a video on demand service, the first to
launch a comprehensive data strategy, and the only one to have
agreed partnerships with social platforms such as Snap and
TikTok. Indeed, Channel 4’s size and agility is what makes it a
compelling partner for other media companies. Recent deals
include with Sky, Snapchat, TikTok and Netflix, and most recently
partnering with Amazon Prime to bring the US Open final with
Emma Raducanu to 9.2 million viewers free-to-air. Channel 4
can deliver scale through partnerships – and in fact, selling
Channel 4 to a global media brand may make it harder, not
easier, to partner with other organisations as they turn into direct
competitors. Channel 4’s model has proven that it does not just
survive but thrives in response to a significant market change
due to its agility and innovation focus.
Paralympics Live
8 BARB data.
7
Channel 4
• Become an international publisher-broadcaster. We will
seek more ways to support and incentivise global growth for
shows and formats generated by UK indies, while extending
Channel 4’s reach, growing our revenue streams and projecting
British culture and values abroad. To achieve this, in 2022 we
will be boosting the size of our Global Format Fund, which we
launched last year to create new formats with global potential,
from £8 million this year to £20 million next year. We also
believe there is an opportunity to launch an advertiser-funded
streaming service internationally, building on our success
and containing select Channel 4 content. While extending our
global impact, we would seek to do this within the framework
of respecting producers’ secondary rights, finding mutually
beneficial routes to showcase British content internationally.
• Act as a public service catalyst across the UK. Accelerating
our impact, supporting jobs and growing skills and
opportunities in all corners of the UK. From 2022, we will
Steph’s Packed Lunch supercharge 4Skills so that its training and development
initiatives help over 15,000 young people from disadvantaged
backgrounds every year – an investment worth £5 million
Channel 4 is in a demonstrably strong position and has shown
annually. This will include a new Digital Academy, with paid
its ability to adapt to a fast-paced media market. While we fully
three-month training and work placements for young people
acknowledge the challenges identified in the consultation, we do
from lower socioeconomic backgrounds, a new pan-UK
not share the Government’s view that these are directly linked to
schools engagement programme and a new on and off screen
the question of public or private ownership; in fact, we think our
training programme for people with disabilities in advance of
current ownership model makes us well-placed to adapt to them.
Paris 2024 Paralympic Games.
4. C
hannel 4 under public ownership can deliver 5. Channel 4’s focus is on delivery of our remit, and
even greater value for Britain – with more British maximising our public impact: moving Channel 4
content, projecting British soft power overseas to a profit driven model would be likely to have
and creating more British jobs negative consequences
We have carefully considered the Government’s questions about Crucially, moving Channel 4 into private ownership will inevitably
what more Channel 4 can do to ensure we thrive in the long term. and fundamentally alter the incentives and culture of the
We have the ambition and the opportunity to go even further in organisation and this will have inevitable knock-on effects on
future – delivering even more to our audiences and the country how Channel 4 delivers its remit. We expand on this point in our
more broadly. We believe there are three areas we can focus on answer to Question 4.
to build our impact – together, these represent a strategy for
supporting more British jobs, for serving British viewers with more Under private ownership, Channel 4’s fiduciary duty 9 and
content, and for projecting British soft power overseas: main priority would (quite properly) be to maximise returns to
shareholders. Under public ownership, instead of maximising
• Excel as the young people’s PSB streamer. Channel 4 is the profits, Channel 4 can focus on maximising public impact and
young peoples’ PSB streamer. And we will invest more behind remit delivery by reinvesting any available surplus.
this proposition, leveraging our progress in technology and
our platforms further in order to bind successive generations Under private ownership, the new owners of Channel 4 could
of young British viewers to strong, valuable and trustworthy take a minimalist approach to interpreting our remit and attempt
public service media. This includes: to deliver it at the lowest cost possible. This could lead to
cost cutting across key areas that are currently not revenue
– £50 million to be invested in content for younger viewers generating – for example a reduction in public service genres,
across genres; in risky areas such as Film4, and in initiatives such as 4Skills and
– a new All 4 first strand of Dispatches in 2022 covering issues our regional investment plans.
specific to young people;
To provide objective and evidence-based analysis of these
– £5 million to be invested in All 4 first documentaries that issues, we commissioned EY to conduct an analysis of the
reflect the lives of young people; implications of a change of ownership. We submit EY’s report in
full alongside this submission for the Government to review.
– a tripling of investment in our new Teens content strand
investment to triple; and
EY concluded that “a private owner of Channel 4 would need
– all scripted content to be primarily commissioned for All 4 to balance fulfilling its public service remit with its duty and
before linear broadcast. incentive to generate value for private shareholders. As such, the
new private owner of Channel 4 could seek to focus investment
on activities that are expected to deliver stronger commercial
performance. Under this approach, the new owner of Channel 4
could seek to deliver against its minimum commitments, and
could choose not to undertake any additional voluntary actions
in excess of fulfilling its remit.”
9 Section 172 of the Companies Act requires business to operate in the interests
of “members” (owners/shareholders) https://www.legislation.gov.uk/
ukpga/2006/46/section/172
8
Channel 4
EY’s analysis concluded that this approach could result in:
• Reduction in content spend
• Reduction in regional spend on content
• Cuts in investment in training and development programmes
• Fewer roles based in the Nations and Regions
• Acquisitions representing a higher proportion of total content
spend
• Reduction in feature film investment
• Content that is “more likely to focus on a mainstream
interpretation of UK culture”
• Content that “appeals to a more global audience… potentially
undermining the role that public service broadcasters play in
representing the UK to the rest of the world”
Derry Girls
As a market comparison, privately-owned ITV and Channel 5
have consistently reduced their public service obligations
over time, including (for ITV) significant reductions in regional 6. A
change in ownership will have an impact on
news, current affairs, and content spend outside of London. investment and jobs in the creative industries
By contrast, Channel 4 has increased provision over time
– consistently delivering beyond its minimum regulatory An impact assessment would need to consider the impact on
requirements to deliver transformative public impact and has investment and jobs in the UK’s creative economy, particularly in
voluntarily increased the percentage of its spend on content the Nations and Regions.
produced in the Nations and Regions to 50%, far beyond the
regulatory requirement of 35%. In the analysis commissioned for Channel 4, EY estimates that
privatising Channel 4 with its current remit and role could result
The Government has suggested that one approach to ensuring in a reduction in Channel 4’s contribution to GDP (measured
Channel 4’s remit delivery under a private owner would be to as gross value added or GVA) through its supply chain of
strengthen its licence conditions. However, we are concerned £1 billion (-15%) over a ten-year period compared to no change
that a focus only on licence obligations underestimates the of ownership for Channel 4. This would represent an estimated
extent to which under Channel 4’s current model the remit reduction in the number of jobs supported by Channel 4 in its
permeates its full range of programming – far beyond the supply chain each year across the UK by 1,300 (-14%) compared
specific quotas required of us. In entertainment, shows like Joe to a scenario where Channel 4 remains in public ownership.
Lycett’s Got Your Back, marry hard-hitting consumer journalism
with humour. In comedy, we tackle subjects as tough as mental If the new private owner of Channel 4 reduces spend in the
illness or immigration with titles like This Way Up or Feel Good Nations and Regions to the level of Channel 4’s quota (35%),
or Home. New drama Help, broadcasting later in September, will EY estimate that Channel 4’s contribution to GVA through its
highlight the tragedy that played out in our care homes in the supply chain in the Nations and Regions could reduce by 43%
early months of the pandemic. Elsewhere, prime time popular (£1.2 billion) over a ten-year period. Similarly, EY estimate that
factual shows like The School That Tried to End Racism, The jobs supported by Channel 4 in the Nations and Regions each
Write Offs or The Restaurant that Makes Mistakes explore major year (both directly and in its supply chain) could reduce by 60%
societal issues as diverse as unconscious bias, adult illiteracy (2,300 fewer jobs supported each year) compared to a scenario
and dementia. Beyond specific programmes, Channel 4 has also where Channel 4 is not privatised.
invested in ambitious industry initiatives to promote diversity
and inclusion – most notably Black To Front, in which we Further, if Government removes Channel 4’s publisher-
broadcast 24 hours of television showcasing Black talent on and broadcaster status, a new owner may be incentivised to invest
off screen. Black To Front included black cast and crew in some in in-house production, rather than the external sector. EY
of Channel 4’s biggest shows – from Hollyoaks to Countdown, estimate that if the publisher-broadcaster restriction was
and set out to leave a lasting legacy in terms of increased Black removed, and the new owner of Channel 4 commissioned
representation both on- and off-screen. 66% of its content from Channel 4’s new in-house production
unit, in line with ITV Studios’ share of original content on ITV’s
All of these titles and initiatives deliver strongly to Channel 4’s main channel between 2016 and 2020, the present value of
broader public service remit – and yet none of them contributes Channel 4’s supply chain contribution to GVA over a ten-year
to the specific quotas of programming that Channel 4 is required period could be 29% (£2.1 billion) lower compared to Channel 4’s
to produce. Given this, a private owner would have a natural and current model (£5.1 billion vs. £7.2 billion). As such, the increase
legitimate incentive to seek to both dilute the more commercially in Channel 4’s direct GVA represents, in large part, a transfer of
onerous parts of the channel’s remit and to scale back those value from companies in Channel 4’s supply chain to Channel 4’s
additional public benefits which are not mandated by the new owner and its shareholders.
statutory remit.
9Channel 4
Paralympics
PARALYMPICS
Channel 4 secured the rights to the 2012 Paralympics – the
first time it had been on a commercial broadcaster. No other
commercial broadcaster even bid for the London 2012 rights,
despite it being a home Games.
Channel 4 did not just air the Paralympics, we set out to
challenge attitudes towards disability among UK audiences.
Following London 2012, 83% of viewers agreed that
Channel 4’s coverage of the Paralympics improved society’s
attitude towards people with an impairment, while 64% of
viewers felt more positive towards people with a disability
as a result. Since 2012 our coverage is used worldwide as an
example for other countries – most recently the President
of the Paris 2024 Committee noting that it was looking to
Channel 4 as the international benchmark for Paralympic
coverage.
Channel 4’s coverage of the Tokyo 2020 Paralympic Games
was viewed by over 20 million viewers – a third of the UK
population (33%) and a fifth of young people aged 16-34 (22%).
This year’s coverage was its most ambitious to date, airing over
300 hours of around-the-clock coverage on Channel 4 and
More4, as well as over 1,000 hours via 16 live streams on All 4
– capturing every event that was covered live. On-screen over
70% of the broadcaster’s presenting line-up were disabled
making Tokyo 2020 coverage its most diverse ever.
A privately-owned Channel 4 is highly unlikely to put the same
level of investment or commitment into not just the Paralympic
Games, but the programming around the Games like Jonnie’s
Blade Camp or The Last Leg, which stems directly from it. Our
strong public mission, based on a maximalist interpretation of
our remit, enabled by our public ownership, allows us to take
the risks and make the investments that enable us to tell and
develop our national story in a transformative way.
Channel 4’s investment in the
Paralympic Games is a spectacular
success story. As the UK Government
considers the future of public service
broadcasting, I would urge it to ensure
that any changes to Channel 4’s model
do not harm its ability to support the
Paralympic Movement into the future.”
Andrew Parsons, President, International
Paralympics Committee
10Channel 4
EY’s analysis also demonstrates that a move into private Figure 1: Summary of our analysis of
ownership could particularly affect regional economies, with
benefits accruing to London as investment shifts from the the present value of GVA generated by
Nations and Regions to the capital. Privatising Channel 4 with Channel 4 over a ten-year period
its current remit and role could result in a reduction in GVA
generated by Channel 4 in its supply chain in the Nations and
£m
Regions of £1.2 billion (-43%) over a ten year period and a
reduction in jobs supported by Channel 4 in its supply chain each
year in the Nations and Regions of 2,300 (-61%), compared to no 1,120 4,426 2,790 8,336
change of ownership for Channel 4. Channel 4 continues as a publicly-owned not-for-profit publisher
broadcaster and continues to exceed its current public service
This would be amplified by privatising Channel 4 and removing obligations
its publisher-broadcaster status – with EY concluding that
“given Channel 4’s current level of spend with external 2,150 4,572 1,584 8,306
producers outside London, privatising Channel 4 and removing Channel 4 is privatised as a publisher-broadcaster with its current public
the publisher-broadcaster model could have a disproportionate service obligations
impact on the wider creative economy in the Nations and
Regions. Our analysis suggests that the present value of 2,150 3,855 2,301 8,306
GVA generated by Channel 4 in the Nations and Regions in
Channel 4 is privatised as a publisher-broadcaster with heightened public
its supply chain over a ten-year period could be 37% lower if service obligations
Channel 4 is privatised and the publisher-broadcaster model is
removed, compared to Channel 4’s current model (£1.8 billion
vs. £2.8 billion), due to a shift in commissioning spend towards 3,649 3,389 1,756 8,794
in-house productions.” Channel 4 is privatised with heightened public service obligations and the
publisher-broadcaster mode is removed
A private owner is likely to cut costs by reducing investment
in original content – market benchmarks demonstrate that Source: Tapestry, 2020, unique value of Channel 4.
Channel 4 invests a higher proportion of its revenue in content
than other commercial PSB players. Further, if the Government
removes Channel 4’s publisher-broadcaster status, a new owner
Figure 2: Summary of our analysis of the
would be incentivised to invest in in-house production, rather average number of jobs supported by
than the external sector; and regional independent companies Channel 4 each year
would be the most adversely affected. Based on EY’s analysis
and market comparisons, our assessment is there is a real risk
that moving Channel 4 into private ownership will reverse the Number of jobs supported by Channel 4 each year on average
recent progress made towards rebalancing the creative sector
across the UK. 964 248 5,901 3,597 10,710
Channel 4 continues as a publicly-owned not-for-profit publisher
broadcaster and continues to exceed its current public service
obligations
1,060 136 6,772 1,393 9,361
Channel 4 is privatised as a publisher-broadcaster with its current public
service obligations
963 233 5,206 2,959 9,361
Channel 4 is privatised as a publisher-broadcaster with heightened public
service obligations
2,011 1,280 4,716 2,348 10,355
Channel 4 is privatised with heightened public service obligations and the
publisher-broadcaster mode is removed
■ Directly in London ■ Supply chain – London
■ Directly in the Nations ■ Supply chain – Nations
and Regions and Regions
985
Source: Enders Analysis, 2021, Outsourcing Culture.
11Channel 4
7. A change in ownership will have a negative
impact on viewer choice
We are concerned that moving Channel 4 into private ownership
could also result in a reduced diversity and quality of content for
UK viewers. Despite the multiplicity of channels and streaming
options available, viewers come to Channel 4 because we do
things in a fundamentally different way to global streamers, US
based multinationals, and indeed our fellow UK PSBs. There
are also 11.5 million households who still only have access to
free-to-air television – and therefore changes to Channel 4, one
of the main free-to-air broadcasters, is likely to impact on the
choice available to these viewers.
While global players produce content to appeal to as broad an
international audience as possible, Channel 4 is focused on
commissioning content tailored to the lives and experiences of
the British people rather than on content which is guaranteed
to deliver a financial return. This content is highly valued by
Damilola: The Boy Next Door
audiences – research commissioned by Channel 4 in 202010
found that viewers valued public service broadcasting for
bringing the nation together, covering issues that are important
to the country and for reflecting the diverse nature of Britain.
9. C
onsideration of changes to Channel 4’s
ownership must be based on clear evidence
We note research from Enders Analysis that found that the
Any decision on the future of Channel 4’s ownership should be
UK output commissioned by the SVoDs is predominantly less
based on data and transparent analysis of the implications of any
‘British’ than that commissioned directly by the PSBs11.
changes and the likely impact on Channel4’s future prosperity ,
the delivery of its public remit, the impact on the UK’s creative
Despite the volume of content now available across streaming
industries and the media content and choice available to the
services, it is important to recognise the disparity in provision of
wider British public.
first run original UK content between these services and the UK’s
PSBs. The five main public service broadcaster channels (BBC
The consultation document does not include an impact
One, BBC Two, ITV/STV, Channel 4 and Channel 5), S4C and the
assessment. We would stress to Government our view of the
BBC’s other public service channels show around 32,000 hours
importance of publishing a full, transparent impact assessment
of first-run original UK content per year while, in 2018, streaming
ahead of any decision so that the public and all stakeholders
services such as Netflix and Amazon Prime provided 182 hours of
are able to fully understand and consider the impact of
UK-produced content (equivalent to 0.6% of the contribution of
changing Channel 4’s ownership structure. Publishing an impact
the public service broadcasters).12
assessment only after a decision has been made, and without
giving interested stakeholders the opportunity to review and
8. T
here are other levers available to the comment on it, is unusual for a Government consultation
proposing significant policy changes. Other currently open
Government to strengthen Channel 4 without Government consultations have been published alongside
changing its ownership impact assessments, for instance the consultation on the digital
markets regime, the consultation on reforming competition and
The Government sets out in its consultation document that in
consumer policy (which was published alongside three impact
order to overcome the perceived market challenges outlined
assessments), the consultation on the future of the exhaustion
above and strengthen Channel 4’s role in the long term its
of IP rights, the consultation on competition in onshore
preferred option is a change of ownership model. However, it
electricity networks, and the consultation on creating a future
does not outline other potential policy options that could seek
system operator (for electricity and gas). To ensure a robust and
to bolster Channel 4 in the long term, but which could avoid the
transparent process of consultation, stakeholders should be
significant risks of a change in ownership as outlined above.
provided with a robust impact assessment on this topic.
Alongside the Future4 strategy we have set out that we will
ensure there is a clear and sustainable future for Channel 4
as a publicly owned entity, there are a range of levers that the
Government could also be considering, separate to ownership.
These include areas where the Government has already
committed to taking forward action – such as to modernise the
legislation on public service prominence to apply across digital
platforms, as well as reviewing the commercial relationships
between platforms and publishers through the new Digital
Markets Unit. We believe these measures could have a material
impact on Channel 4’s successful transition to a digital-first
organisation. The Government could also consider alternative
means of accessing capital and modernisation of Channel 4’s
licence obligations and public service remit (without in any way
undermining Channel 4’s public contribution). We look forward
to discussing these further with Government.
10 Tapestry, 2020, Unique value of Channel 4.
11 Enders Analysis, 2021, Outsourcing Culture https://www.endersanalysis.com/
reports/outsourcing-culture-when-british-shows-arent-british
12 Ofcom, (December 2020). Small Screen: Big Debate Consultation: The Future
of Public Service Media. https://www.smallscreenbigdebate.co.uk/__data/
assets/pdf_file/0032/208769/consultation-future-of-public-service-media.
pdf
12You can also read
